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LVMH Decision Making Assignment

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Louis Vuitton Malletier, a well-known brand which always referred as Louis or LV. LV has become a dream, icon, representatives of elegance essence which is widely used by the fashion media when being …

Louis Vuitton Malletier, a well-known brand which always referred as Louis or LV. LV has become a dream, icon, representatives of elegance essence which is widely used by the fashion media when being described (Pub Articles, 2012). In the year 1854, Louis Vuitton, started his French fashion in Paris with a suitcase store concept using his own name and the brand itself was later widely spread through the areas for its leather products for almost one century time. In addition, LVMH- Moët Hennessy Louis Vuitton SA, was then created through a $4 billion merger in 1987, is the world's leading luxury goods vendor, providing products –perfumes, designer handbags, jewelry, accessories, sunglasses and books (Funding Universe, 2000). The successful merging is one of the important aspects which made LV’s luxurious fashion image.
LVMH group mission is to represent around the world with the most refined qualities of Western `Art de Vivre’ and continues improvement in synonymous with both elegance and creativity. LVMH emphasizes on the word ‘Perfection’ by paying close attention towards every details in their products, at the same time making their products and cultural values embodied with blending tradition and innovation, kindle dreams and fantasies.
Nowadays, Louis Vuitton diversified their product lines. Besides bags and leather products, LV logo and monogram is not only on accessories, shoes, sunglasses, timepieces, and jewelries, but also other trend indicators such as books and stationeries. LV is the global current leading international fashion selling their products in authentic LV boutiques, upscale department stores and also through its online website. This is because LV products are high standard in terms of quality and status which are highly priced; their market is targeted and segmented for luxurious consumer which made them not easily affordable for regular consumer. With its increased market, LV has gained many rivals in the luxury brand industry such as Versace, Hermes, Burberry, Chanel, Prada, Gucci, Versace, Hermes and so on.
LVMH has become the star brand whilst focusing on their brand history, quality control, marketing buzz, and right designs as the key elements. Having its corporate strategy focuses on business diversification, merger and acquisition, LVMH has become the top producer of luxury products, engaging on all luxury market segments and global renowned brand, and its marketing activities are the organisation’s competitive advantages and core competencies through product quality, service quality, innovation and skills.

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  • 1. Chan Chee Mang TP021569 BM014-3-3-DMKGTable of ContentsNon-Financial Plan.....................................................................................................................31.0 Introduction ................................................................................................................................. 22.0 Demographic and Social Trends ................................................................................................. 33.0 Counterfeit Issues........................................................................................................................ 4 3.1 Recommendations ......................................................................................................................... 54.0 Competition (Porter‟s 5 Forces) .................................................................................................. 6 4.1 Bargaining Power of Buyers ................................................................................................... 7 4.2 Bargaining Power of Suppliers ............................................................................................... 8 4.3 Threats of New Entrants ......................................................................................................... 8 4.4 Threats of Substitute Products or Services ............................................................................. 9 4.5 Rivalry amongst Existing Competitors ................................................................................... 95.0 Marketing .................................................................................................................................. 10 5.1 Product .................................................................................................................................. 10 5.2 Price ...................................................................................................................................... 11 5.3 Place ...................................................................................................................................... 11 5.4 Promotion.............................................................................................................................. 126.0 Environmental Issues ................................................................................................................ 127.0 Plan 1 ........................................................................................................................................ 14 7.1 Maximax ............................................................................................................................... 14 7.2 Maximin ................................................................................................................................ 14 7.3 Minimax Regret .................................................................................................................... 15 7.4 Hurwicz (Criterion of Realism) ............................................................................................ 16 7.5 Expected Value Approach .................................................................................................... 16 7.6 Expected Opportunity Loss Approach .................................................................................. 17 7.7 Expected Value of Perfect Information (EVPI) .................................................................... 178.0 Plan 2 ........................................................................................................................................ 189.0 References ................................................................................................................................. 1910.0 Appendices................................................................................................................................ 24 10.1 Appendix 1 ............................................................................................................................ 24 10.2 Appendix 2 ................................................................................................................................ 25 10.3 Appendix 3 ............................................................................................................................ 26 Asia Pacific University of Technology & Innovation Page | 1
  • 2. Chan Chee Mang TP021569 BM014-3-3-DMKG Non-Financial Plan1.0 IntroductionLouis Vuitton Malletier, a well-known brand which always referred as Louis or LV. LV hasbecome a dream, icon, representatives of elegance essence which is widely used by thefashion media when being described (Pub Articles, 2012). In the year 1854, Louis Vuitton,started his French fashion in Paris with a suitcase store concept using his own name and thebrand itself was later widely spread through the areas for its leather products for almost onecentury time. In addition, LVMH- Moët Hennessy Louis Vuitton SA, was then createdthrough a $4 billion merger in 1987, is the worlds leading luxury goods vendor, providingproducts –perfumes, designer handbags, jewelry, accessories, sunglasses and books (FundingUniverse, 2000). The successful merging is one of the important aspects which made LV‟sluxurious fashion image.LVMH group mission is to represent around the world with the most refined qualities ofWestern `Art de Vivre‟ and continues improvement in synonymous with both elegance andcreativity. LVMH emphasizes on the word „Perfection‟ by paying close attention towardsevery details in their products, at the same time making their products and cultural valuesembodied with blending tradition and innovation, kindle dreams and fantasies.Nowadays, Louis Vuitton diversified their product lines. Besides bags and leather products,LV logo and monogram is not only on accessories, shoes, sunglasses, timepieces, andjewelries, but also other trend indicators such as books and stationeries. LV is the globalcurrent leading international fashion selling their products in authentic LV boutiques, upscaledepartment stores and also through its online website. This is because LV products are highstandard in terms of quality and status which are highly priced; their market is targeted andsegmented for luxurious consumer which made them not easily affordable for regularconsumer. With its increased market, LV has gained many rivals in the luxury brand industrysuch as Versace, Hermes, Burberry, Chanel, Prada, Gucci, Versace, Hermes and so on.LVMH has become the star brand whilst focusing on their brand history, quality control,marketing buzz, and right designs as the key elements. Having its corporate strategy focuses Asia Pacific University of Technology & Innovation Page | 2
  • 3. Chan Chee Mang TP021569 BM014-3-3-DMKGon business diversification, merger and acquisition, LVMH has become the top producer ofluxury products, engaging on all luxury market segments and global renowned brand, and itsmarketing activities are the organisation‟s competitive advantages and core competenciesthrough product quality, service quality, innovation and skills.2.0 Demographic and Social TrendsIt is vital for Louis Vuitton to have well understanding in demographic and knowledge insocial trends from time-to-time in order to identify the target market to get the right marketsegment, continuously improve with innovated and creative products to cater the marketdemands in order to achieve competitive edge in the luxury industry. LV brand has beenstrategized to target different nation, both men and women ranging from the age from 22years old to 65 years. LV consumers has been revealed in through the increase of agingpopulation of minority from the loyal baby boomers, majority generation X and Y whichshares the same attitude of going after luxurious lifestyles with a certain degree of socialstatus and education level. LV consumers are similar in their buying power and spendingpower which are greater from very rich to middle class, as it evolve the economies of somedeveloping countries such as China, India and Brazil. A good example would be the resultwhich LV has contributed in China and Japan with the rapid rise of net profit since 2000s.LV should strategies on alternating their design products made for niche consumer meaning aspecific product made for only a certain demographic groups. With this, it will also allow thecompany to correctly identify the needs of the marketing target and segments to ensure thebrand‟s milestone.Compared to its origin country, LV has stronger brand reputation in Asian countries likeTaiwan, Japan and Hong Kong. This happen especially on the LV leather bags product. Bythe bags products itself, LV has achieved 40 per cent sales among Japanese Woman sinceyear 2000s. With the result, LV has successfully captured the Asian market by changing theirlifestyles through the unique monogram and high quality products (Marketing to China,2012).Moreover, LV should also consider scheming products for big sized women or tall menmarkets. In fact, nowadays there are changes in the Western consumer groups especially Asia Pacific University of Technology & Innovation Page | 3
  • 4. Chan Chee Mang TP021569 BM014-3-3-DMKGAmericans on their attitude and behaviour towards luxury products. Due to the populationaverage weight of American citizens, many of them find it difficult for branded products tosuit them (Nguyen, 2004). If only LV can cater their design product to this wildest upwardsegment in the market with characterising their product, they will be able to gain anotherpotential profitable market (Pew Research Center, 2012). This can be proven according toresearches, Asian Americans are the highest income, best educated and fastest growing racialgroup in the United States America‟s child population grew more far diverse over the pastdecade as a decline in the ranks of white children was offset by surging growth of Asians andHispanics (Dougherty, C., 2011). Asian Americans and Hispanics may be the minorities butthese groups in particular are experiencing growth in buying power that greatly exceeds thatof the general population which will be the good opportunity for LV products (Fahmy, S.,2010).3.0 Counterfeit IssuesLouis Vuitton is one of the world famous owners of registered and common law trademarks.As the following are the common “LV trademarks”:(Sources from: Fashion Law Notes, 2012, LOUIS VUITTON WINS IMPORTANT RULINGIN THE BATTLE AGAINST COUNTERFEITING, available at:http://www.fashionlawnotes.com/2012/04/louis-vuitton-wins-important-ruling-in.html) Asia Pacific University of Technology & Innovation Page | 4
  • 5. Chan Chee Mang TP021569 BM014-3-3-DMKG(Sources from: Detailed trademark information from the official, 2012, European Uniontrademark database (CTM), available at:http://trademark.markify.com/trademarks/ctm/lvs+dairek+usa./003939501)George Vuitton, Louis Vuitton‟s son created the “Toile Monogram” pattern, comprised withthe initials LV and 3 distinctive design elements- a circle with a four-leafed flower inset; acurved beige diamond with a four-point star inset; and its negative, in the 1890‟s to protectthe Louis Vuitton brand products from the unlawful imitators. Since that time, Louis Vuittonhas manufactured and sold their products bearing from Toile Monogram and secured numeralfederal trademark registrations for LV trademarks, including the Toile Monogram and everyelements of the pattern. Since its founding in 1854, Louis Vuitton has built up its reputationworldwide for its design, innovation, quality and style in women‟s and men‟s leather goods,fashion apparels and accessories. To help protect its valuable trademarks and to preserve thegood will and exclusivity of Louis Vuitton designs, Louis Vuitton closely controls the salesof its products and the use of its trademarks, and has devoted and continues to devotesubstantial resources to protect LV trademarks.3.1 RecommendationsIn the numerous fake LV products, the biggest sources are from Turkey, China, Thailand,followed by Italy, South Korea and Morocco (Toy, S., 2012). Since LV has counterfeitedmany issues on the violation of the trademarks, they should emphasise on providing propereducation on the brand itself and knowledge on the trademarks towards their customer aspremeasures by encouraging the customers on its genuine product. With the increase ofawareness on differentiating the real and the fake product (substitutes), can prevent andreduce the number of substitutes in the market. And yet, LV is able to sustain their brand in Asia Pacific University of Technology & Innovation Page | 5
  • 6. Chan Chee Mang TP021569 BM014-3-3-DMKGthe marketplace. Assisting with the brand education, LV should set up an expert team madeup by auditors and attorney generals in order to be responsible in presenting law suits orspecial investigation on trademark issues.Also, LV should find ways in aligning with the government policy regards to intellectualproperty rights in each state along with the copyright policies stating in the constitution law.By this, help contributions from the government will allow LV to have legislative effect toencounter the copycats. For example, a French maker of luxury goods, has successfullylobbied the French parliament to make the import of even one counterfeit article a criminaloffense (Toy, S., 2012). Furthermore, the order got into effect in 60 days unless PresidentBarack Obama overrules it on public policy grounds, directs Customs and Border Protectionto turn away any products that are made in a way that is similar or copies the Louis Vuittontrademarks (Slind, V., 2012). This shows that in USA and France, only genuine LV productsare able to enter to the market and the action reduces the chances for counterfeit products inthe market.As the world leading luxury brand, everyday Louis Vuitton knowingly faces the stark ofreality battling and interdicting the proliferation of infringements of LV trademarks. LV hasbeen facing many counterfeiting issues especially in protecting their intellectual propertyrights (IPR). As time passed, LV has become one of the most counterfeited fashion brands inglobal. Recently, there is a rise in counterfeiting luxury products because numerousmanufacturing has been shifted to countries with poor intellectual property rights and withthe opportunity provided to those countries by technology such as Vietnam. But still, LouisVuitton is proud of its reputation for protecting intellectual property and creativity.4.0 Competition (Porter’s 5 Forces)To appraise the competition in the luxury brand industry, it is compulsory for company likeLVMH to adopt Porter‟s Five Forces model in order to identify their position in themarketplace, to analyse the attractiveness and productivity of LVMH‟s products, and topredict and determine approaches of the 5 forces (factors) which are risk of new entrants,bargaining power of buyers, bargaining power of suppliers, rivalry among established firmsand the threat of substitutes. Asia Pacific University of Technology & Innovation Page | 6
  • 7. Chan Chee Mang TP021569 BM014-3-3-DMKG4.1 Bargaining Power of BuyersIn LVMH case, the bargaining power of buyers is relatively low. This is because the targetedcustomers of LVMH are smaller in terms of market size, limited in amount of number ofcustomers resulted less need of buyers to intellect with company‟s total orders.There are two types of customers which are the super-rich and middle-market customers, whoselectively trade-up to higher levels of quality, taste and aspiration. The super-rich customers,also known as the High Net worth Individuals, seem not subject to the world economic cycles.In addition, they are a growing number. Estimates predict that their number will increasefrom 26 million in 2000 to 40 million in 2005 shows an increase of 9% p.a.The middle-market customers are those that are willing to buy luxury goods, but "they wantthe hottest, trendiest design, which increasingly have to be marketed in creative andexpensive ways". They can potentially expand the market quite dramatically, as they are partof the upper-middle class. They are considered to be both a great opportunity (show no pricesensitivity when buying the "hottest" product) but they are also a threat. "They are moredemanding, more selective and show less brand loyalty than the super-rich class". Thisimplies for the luxury goods industry a difficult equilibrium between the two kinds ofcustomers, because both are not necessarily compatible. This can lead to a difficult trade-offbetween satisfying a smaller number of loyal customers and a larger number of more volatilecustomers.In summary, LVMH customers are grouped up in the categories of the extremely highincome people, rich to middle income level customers and for so, LV products are highlypriced. The company emphasises on brand loyalty and customer loyalty. Since the productdifferentiation is high, customers including the retailers and end users will not be able to havenegotiation or bargain on their products. With this reason, high end products of LVMHdoesn‟t offer discount sales. Asia Pacific University of Technology & Innovation Page | 7
  • 8. Chan Chee Mang TP021569 BM014-3-3-DMKG4.2 Bargaining Power of SuppliersThe bargaining power of the suppliers depends on the segment. As some tended to haveincreased bargaining power, this leads to the concentration and vertical integration trend inthe industry, one of the reasons for which is to lessen the bargaining power of the suppliers.Until now, there is not observed concentration among the suppliers of the luxury goodsindustry among themselves. There is however a trend for larger houses to buy smallersuppliers and to deprive the market forms access to those suppliers. For example, LVMH hasrecently taken over Les Tanneries Roux, a Romans-sure-Isere-based leather supplier(Accessories Magazine, 2012). With this move to acquire key suppliers will reduce thebargaining power of suppliers in terms of leather products. By limiting the capability to playsuppliers contrary to each other, LVMH would be able to save costs on storage space andcapable in making sure of the quality of products supplied.In the case of LVMH‟s bargaining power of suppliers is relatively low. This is because thecompany often purchase raw materials from suppliers in basis of consignment. With thismethod, it reduces the loss marking and establishes economies of scale.4.3 Threats of New EntrantsThere are a few new entrant threats which LVMH can focus on evaluate how much of athreat of new entrants are for LVMH it is critical to scrutinise the blockades of entry into thebusiness. First of all, new entrants made up mainly by new designers- starters of new ownbrand in the industry. Normally, if these new entrants are successful, they would be quicklyacquired by the more famous brand of the industry to provide them facilities and neededinfrastructure for growth. In return, if the new entrant remained independent, this wouldrepresent a threat to company like LVMH by capturing the volatile middle market customers(Hills and Jones, 2010). These customers go after the established name and the perceptionbuild around it, after the quality and design. All these elements take time to be built, whichmakes the threat of new entrants less significant. Asia Pacific University of Technology & Innovation Page | 8
  • 9. Chan Chee Mang TP021569 BM014-3-3-DMKGIn contrast, threat of new entrants can be low as barriers to entry are high. As LVMH hasfashioned and already built a strong brand image and perception in the market for long time,customer‟s loyalty and trustworthy deep-rooted for its brand name, product service andquality are undeniable whereby a new entrant cannot be compatible for short period of timewhich is why barriers to stay are also relatively high as company has to engage between elite,durable, and fashionable reputation. Big Brand Company like LVMH has been functioning inthe luxury products market for a century gives them the complete cost advantage in businesskey development which is absolute to new entrants by playing well in engaging their imagein the marketplace to sustain their perception to cater not only customer‟s needs and wantsbut also the customers‟ desires. Later on, many new entrants find it difficult to survive andwould easily be kicked out from the market. A very good example of new entrant is Hermesnewly launched in Shang Xia, China. Not for long, they have to close down due to unable tosustain in the China market.4.4 Threats of Substitute Products or ServicesIn LVMH case, threats of substitute products or services are relatively high. This is due to,besides Louis Vuitton, there are many other luxury products such as Prada, Dior, Chanel,Hermes, Armani Exchange and so on. However, the main direct competitor to LVMH isPinault-Printemps-Redoute (PPR), a French luxury holdings company that includes suchbrands as Yves Saint Laurent and Gucci, and Compagnie Financiere Richemont. Another is aSwiss luxury company that includes such brands as Cartier and Montblanc. Each majorluxury brand has their own reputation and quality. Thus, it is important for LVMH toemphasise on the company core competency, uniqueness of product and service, to well-manage counterfeit issues and to attract and retain capable employees in order to have bettervalue chain and distribution to reach the final users. Also, due to the uniqueness of LVMH ontheir “Toiler Monogram”, substitutes find it hard to earn in the market when the loyalcustomers are well-knowledge on the differences.4.5 Rivalry amongst Existing Competitors Asia Pacific University of Technology & Innovation Page | 9
  • 10. Chan Chee Mang TP021569 BM014-3-3-DMKGThe competitiveness in the industry can be qualified as relatively high, but given the highmargins and the customers perception about the price, the competition is not on price, butrather on quality and image perception, as well as on the ability to attract the right designerswith right abilities. This created “Wars of Talents”. For example, LVMH has the stardesigner-Marc Jacobs.For the rivalries, the barriers to entry are very high. LVMH has built the intangible image andthe perception built around the brand. The barriers to stay are also very high: there is acontinuous need to "feed" the image, to maintain the perception but still to respond tocustomers needs and changing expectations. The trade-off between exclusivity, stylishness,extravagance and lasting image makes it difficult to be for a long time in the business. Thereare hardly any barriers to exit given the high barriers to entry and to stay and the low barriersto exit, the dynamics of the industry are: few big players and only the best, as the otherseither cannot get in, or are easily out.Moreover, LMVH have to bear copycats as the high level of fakes as an open publicity andcompetition from other brands, as there is only a limited group of customers who can affordto buy the genuine products due to limited brands.5.0 MarketingThe marketing mix 4Ps which are mainly product, price, place and promotion work as thebasic elements for marketing plan for LVMH in projecting their products and services intothe marketplaces.5.1 ProductLouis Vuitton becomes one of the best luxury brands in the global market with productsdesigned by the well-known and talented designer-Marc Jacob and high quality of rawmaterials (Louis Vuitton, 2012). LV‟s main products ranging with leather bags and walletsincluding luggage, handbags and cosmetic bags with monogram as its product line. Later on,LV starts to expand its product line to monogram denim, multicolour, vernis, and damiercanvas. Also, there are increased of variety on product types as well offering jewelleries,sunglasses, belts, timepieces, scarves, accessories and lots more. Each product is labelled Asia Pacific University of Technology & Innovation Page | 10
  • 11. Chan Chee Mang TP021569 BM014-3-3-DMKGwith the brand name, Louis Vuitton. Furthermore, product of Louis Vuitton are divided into 3levels mainly the core product which is luxury, the actual product which includes brand,fashion, durable, quality, and lines of product, the augmented product which includescustomer care, service, gift wrappings, and warranties. Below is the 3-leves of LV‟s products. Durable Fashion Customer Warranties Care ‘Luxury’ Quality Brand Lines of Product Gift Service Wrappings5.2 Price LV‟s main target customers are from rich to middle class populations. These twogroups of people are sharing the same attitude of going after luxurious and have disposableincome. LV priced their products highly, not easily affordable by anyone using skimmingstrategy and wouldn‟t offer discount because of its brand name, service and quality of itsproducts. Its premium pricing is supported by its luxury image and limited quantity for everyproduct designed. Also, this is to ensure LV is able to maximise its revenue before anysubstitute appear in the marketplace.5.3 PlaceLouis Vuitton only sells expensive and luxurious products, they do not apply wide range fordistribution channels. So majority of their products are displayed only at limited stores likeupscale department stores, LV‟s authentic boutique, its official website, and mostly at Asia Pacific University of Technology & Innovation Page | 11
  • 12. Chan Chee Mang TP021569 BM014-3-3-DMKGnational borders.This is to ensure LVMH can monitor efficiently of the distribution channelclosely and to protect their intellectual property.Suggestion for LV in strengthening their place strategy along with market expansion is toestablish more stores at the capital city of developing counties in East Asian regions like inIndia with the existing 4 stores (Louis Vuitton, 2012). This is because countries like China,Japan, Taiwan, Singapore and others are having high demand in changes, creativity andinnovation with fast growing economies and the increase of income level.5.4 PromotionLouis Vuitton has been focuses for personal product selling for many years and not withdiscount sales or promotion in order to maintain the brand luxury reputation. LV promotestheir products especially new designs by advertising in upscale and fashion magazines asmarketing tool such as Vogue and Elle, sometimes billboards in countries like South Koreaand Japan in order to create customer awareness and quality recognition. There are alsovarious advertisements done by LV to increase on customer knowledge and recognition.In Western countries, LV has been using celebrities like Madonna and Angelina Jolie. InAsian region, LV should elect their brand ambassador who are having the closest image andpersonality in the media towards their product as promotion spokesperson, in order to attractfor attention and generate more sales from their products. For example, Girls Generation(also known as SNSD), the “Gorgeous Goddesses” of Korean- Pop idol icon in group whoalready won over the hearts of Asian countries, Los Angeles and even Paris. Recently, thisgroup of girls had won over with the highest voting as country representative icon of SouthKorea in London Olympic 2012 with their elegance, splendid, pretty princesses look infashion, not Justin Bieber or any other international super star.6.0 Environmental IssuesEnvironmental, social and ethical pressures on the global textiles and fashion sector emergedin Europe in the early 1980s. The main driver was consumer concern over the safety of thematerials. However in parallel with this trend, a minority group of ethical consumersdemanded “chemical-free” and low environmental impact clothing and fashion goods. This Asia Pacific University of Technology & Innovation Page | 12
  • 13. Chan Chee Mang TP021569 BM014-3-3-DMKGresulted in the European and later the US organic labelling system being extended to includecriteria for clothing and textiles, such as organic cotton (United Nation Global Compact,2006). As of 2007, the sector was the fastest growing part of the global cotton industry withgrowth of more than 50% a year. With reference to safety standards, primarily addressingconsumer concern over chemicals in textiles, the Oeko-Tex standard has become highlypopular in the industry. Although unknown to consumers, it tests for chemicals such as flameretardants in clothes and categorizes goods according to their likely exposure to humans.Thus the issue of chemicals in clothing has become largely one of liability risk control for theindustry with the consumers obviously expecting products to pose no risk to their health.Louis Vuitton-a niche brand at the top end of the luxury fashion industry, has emerged whichpromote themselves primarily on sustainability grounds People Tree in the UK states that it“creates Fair Trade and organic clothing and accessories by forming lasting partnerships withFair Trade, organic producers in developing countries. Leading fashion journal Marie Claireranked its “top 10” eco brands in a recent issue. The key issues remain chemicals in clothingwith certified by organic and Fair Trade labels), worker treatment also certified by SA 8000and Fair Trade, and increasingly mainstream environmental issues such as climate change.The Carbon Reduction Label verifies LVMH product‟s cradle-to-grave carbon footprint,although is not specific to clothing (LVMH Environment Report, 2011).The Fair Trade movement has also had a significant impact on the luxury product business.The standard combines a number of ethical issues of potential concern to consumers such asenvironmental factors, fair treatment of developing country suppliers and worker welfare(including child labour, minimum wages, working hours and employee benefits).LVMH has also made their company commitments on the full range of ethical issues, due tothe difficulties of switching their supply chains and products lines completely in favour oforganic or Fair Trade certified or other standards and norms, they tried to move as fast aspossible. Although, LVMH is moving slowly, to ensure they capture the market if it becomessignificant, the world‟s largest fashion brand Louis Vuitton recently acquired an eco fashionlabel (LVMH, 2012). It is clear certain issues can be overcome, as a demand by Westernconsumers that leading brands manage the Corporate Social Responsibility (CSR) properly. Asia Pacific University of Technology & Innovation Page | 13
  • 14. Chan Chee Mang TP021569 BM014-3-3-DMKG Financial Plan 7.0 Plan 1 State of Nature Decision Competitive Foreign Conditions ($) Poor Competitive Conditions ($) Expand 800,000 500,000 Maintain status quo 1,300,000 -150,000 Sell now 320,000 320,000 7.1 Maximax State of Nature Decision Competitive Foreign Poor Competitive Maximax ($) Conditions ($) Conditions ($) Expand 800,000 500,000 800,000Maintain status quo 1,300,000 -150,000 1,300,000 Sell now 320,000 320,000 320,000 Therefore, according to Maximax approach showing with the figure $ 1,300,000, Louis Vuitton should accept decision to Maintain Status Quo of their company in order to remain their finance situation in long run. 7.2 Maximin State of Nature Decision Competitive Foreign Poor Competitive Maximin ($) Conditions ($) Conditions ($) Asia Pacific University of Technology & Innovation Page | 14
  • 15. Chan Chee Mang TP021569 BM014-3-3-DMKG Expand 800,000 500,000 500,000 Maintain status quo 1,300,000 -150,000 -150,000 Sell now 320,000 320,000 320,000 Therefore, according to Maximin approach showing the figure $ 500,000, Louis Vuitton should accept decision to Expand the Market for their company in order to gain more sales and revenue. 7.3 Minimax Regret State of Nature Competitive ($) Poor ($) Minimax Decision Foreign Competitive Regret ($) Conditions ($) Conditions ($) 1,300,000 – 500,000 – Expand 800,000 800,000 = 500,000 500,000 = 0 500,000 500,000 1,300,000 – 500,000 – (-Maintain status 1,300,000 1,300,000 = 0 -150,000 150,000) = 650,000 quo 650,000 1,300,000 – 500,000 – Sell now 320,000 320,000 = 320,000 320,000 = 980,000 980,000 180,000 Therefore, according to Minimax Regret approach showing the figure $ 500,000, Louis Vuitton should accept decision to Expand their Market in order for the company to generate more sales and revenue and yet higher return in investment. Asia Pacific University of Technology & Innovation Page | 15
  • 16. Chan Chee Mang TP021569 BM014-3-3-DMKG 7.4 Hurwicz (Criterion of Realism) Competitive Poor Alternatives Foreign Competitive Criterion of Realism ($) Conditions ($) Conditions ($) D1 500,000 0 (0.3)(500,000) + (0.7)(0) = 150,000 D2 0 650,000 (0.3)(650,000) + (0.7)(0) = 195,000 D3 980,000 180,000 (0.3)(980,000) + (0.7)(180,000) = 420,000 Therefore, according to Hurwicz approach showing the highest value which is $ 420,000 of Criterion of Realism, Louis Vuitton should accept the decision of D3 which is to Sell their Business as the best option to gain more finance capital from company‟s share. 7.5 Expected Value ApproachAlternatives Competitive Foreign Poor Competitive Expected Value ($) Conditions $ (0.7) Conditions $ (0.3) D1 $800,000 $500,000 (800,000)(0.7)+(500,000)(0.3) = 710,000 D2 1,300,000 -150,000 (1,300,000)(0.7)+(-150,000)(0.3) = 865,000 D3 320,000 320,000 (320,000)(0.7)+(320,000)(0.3) = 320,000 Therefore, according to Expected Value approach with the maximum expected value of $ 865,000, Louis Vuitton should accept the decision of D2 which is Maintain Status Quo in order to remain the company financial situation in the long run. Asia Pacific University of Technology & Innovation Page | 16
  • 17. Chan Chee Mang TP021569 BM014-3-3-DMKG 7.6 Expected Opportunity Loss ApproachAlternatives Competitive Poor Expected Opportunity Loss ($) Foreign Conditions Competitive $ (0.7) Conditions $ (0.3) D1 500,000 0 (500,000)(0.7) + (0)(0.3) = 350,000 D2 0 650,000 (0)(0.7) + (650,000)(0.3) = 195,000 D3 980,000 180,000 (980,000)(0.7) + (180,000)(0.3) = 740,000 Therefore, according to Expected Opportunity Loss approach with the least expected opportunity loss figure of $ 195,000, Louis Vuitton should accept the decision of D2 which is to Maintain Status Quo for the company to strengthen their position for now in order for avoid any possible for future financial risks or crisis which may happen to them. 7.7 Expected Value of Perfect Information (EVPI) EVwPI = (1,300,000)(0.7) + (500,000)(0.3) = 1,060,000 EVPI = EVwPI – EvwoPI EVPI = $1,060,000 – 865,000 = $195,000 The expected value which Louis Vuitton can get for correct and accurate information for the company is $ 195,000. Asia Pacific University of Technology & Innovation Page | 17
  • 18. Chan Chee Mang TP021569 BM014-3-3-DMKG 8.0 Plan 2Stock Price Change ($) Probability Cumulative Interval of Random Probability Number -2 0.05 0.05 0-0.05 -1 0.10 0.15 0.06-0.15 0 0.25 0.40 0.16-0.40 +1 0.20 0.60 0.41-0.60 +2 0.20 0.80 0.61-0.80 +3 0.10 0.90 0.81-0.90 +4 0.10 1.00 0.91-1.00 Random Numbers 0.1091 0.9407 0.1941 0.8083 Price Per Share -1 +4 0 +3 Average stimulated price per share = [ (-1) + 4 + 0 + 3 ] ÷ 3 = 2 Random Numbers 0.2540 0.7144 0.0563 0.0125 Price Per Share 0 +2 -1 -2 Average stimulated price per share = [ 0 + 2 + (-1) + (-2) ] ÷ 3 = - 0.33 Asia Pacific University of Technology & Innovation Page | 18
  • 19. Chan Chee Mang TP021569 BM014-3-3-DMKG9.0 ReferencesAccessories Magazine, LVMH Buys another Top Leather goods Supplier [online]. Availableat: http://www.accessoriesmagazine.com/45096/lvmh-buys-another-top-leathergoods-supplier [Accessed 23 September 2012]Articlesbase (2009) Louis Vuitton – Introduction [online]. Available at:http://www.articlesbase.com/sales-articles/louis-vuitton-introduction-1380955.html[Accessed 23 September 2012]Asian Fashion Law (2011) Hermes and Louis Vuitton Fight Counterfeiters and Win [online].Available at: http://www.asianfashionlaw.com/2012/05/hermes-and-louis-vuitton-fight-counterfeiters-and-win/ [Accessed 23 September 2012]Boorstin, J. (2005) Louis Vuitton tests a new way to fight the faux [online]. Available at:http://money.cnn.com/magazines/fortune/fortune_archive/2005/05/16/8260140/index.htm[Accessed 23 September 2012]Boston (2010) Louis Vuitton sues to stop knockoffs [online]. Available at:http://www.boston.com/business/articles/2010/12/07/louis_vuitton_sues_to_stop_knockoffs/[Accessed 23 September 2012]CBP.gov (2010) CBP and ICE Partner to Stop the Flow of Counterfeit Goods ThroughSavannah [online]. Available at:http://www.cbp.gov/xp/cgov/newsroom/news_releases/archives/2010_news_releases/june_2010/06082010_3.xml [Accessed 23 September 2012]Crampton, T. (2004) U.S. Coordinates Efforts to Stop Counterfeit Goods [online]. Availableat: http://www.nytimes.com/2004/10/05/business/05theft.html?_r=1 [Accessed 23 September2012]Detailed trademark information from the official (2012) European Union trademark database(CTM), [Online]. Available at:http://trademark.markify.com/trademarks/ctm/lvs+dairek+usa./003939501 [Accessed 24September 2012] Asia Pacific University of Technology & Innovation Page | 19
  • 20. Chan Chee Mang TP021569 BM014-3-3-DMKGDougherty, C. (2011) New Faces of Childhood: Census Shows Hispanic and Asian ChildrenSurging as Whites, Blacks Shrink [online]. Available at:http://online.wsj.com/article/SB10001424052748703806304576245030067903412.html#articleTabs%3Darticle [Accessed 23 September 2012]Fahmy, S. (2010) Despite recession, Hispanic and Asian buying power expected to surge inU.S., according to annual UGA Selig Center Multicultural Economy study [online].Available at: http://www.terry.uga.edu/news/releases/2010/minority-buying-power-report.html [Accessed 23 September 2012]Fashion Law Notes (2012) LOUIS VUITTON WINS IMPORTANT RULING IN THEBATTLE AGAINST COUNTERFEITING, [Online]. Available at:http://www.fashionlawnotes.com/2012/04/louis-vuitton-wins-important-ruling-in.html[Accessed 24 September 2012]Hays, J. (2012) Luxury Goods and Brands in China [online]. Available at:http://factsanddetails.com/china.php?itemid=1889&catid=9&subcatid=62 [Accessed 23September 2012]Jeudi (2011) Brief introduction for Louis Vuitton [online]. Available at:http://movadowatch.over-blog.com/article-brief-introduction-for-louis-vuitton-80813658.html [Accessed 23 September 2012]Karam, S. (2012) BMW, Louis Vuitton, Swatch: Can the boom continue? [online]. Availableat: http://populyst.net/2012/06/18/bmw-louis-vuitton-swatch-can-the-boom-continue/[Accessed 23 September 2012]Lea, L. (2011) Designer Louis Vuitton suing local flea market over fake handbags [online].Available at: http://www.woai.com/news/local/story/Designer-Louis-Vuitton-suing-local-flea-market/GwfcVJon90-1fCRuK_HIcA.cspx [Accessed 23 September 2012]Lim, R. (2011) Chinese consumers showing strong appetite for luxury goods [online].Available at: http://www.channelnewsasia.com/stories/marketnews/view/1109942/1/.html[Accessed 23 September 2012]Lundi (2011) Fashion as your son Dingchun Cheng and Ariel louis vuitton ambassador[online]. Available at: http://louis-vuitton-handbags.over-blog.com/article-fashion-as-your- Asia Pacific University of Technology & Innovation Page | 20
  • 21. Chan Chee Mang TP021569 BM014-3-3-DMKGson-dingchun-cheng-and-ariel-louis-vuitton-ambassador-86266423.html [Accessed 23September 2012]LVMH (2006) Communication on progress: Global Compact [online]. Available at:http://www.unglobalcompact.org/system/attachments/2897/original/COP.pdf?1262614359[Accessed 23 September 2012]LVMH (2012) Group mission and values [online]. Available at: http://www.lvmh.com/the-group/lvmh-group/group-mission-and-values [Accessed 23 September 2012]LVMH, Human Resources Vision [online]. Available at:http://www.lvmh.com/talents/human-resources-vision [Accessed 23 September 2012]Marco (2011) Louis Vuitton bags and intellectual property [online]. Available at:http://stop.zona-m.net/2011/03/louis-vuitton-bags-and-intellectual-property/ [Accessed 23September 2012]Moore, D. (2012) The Louis Vuitton Story: With Fine Craftsmanship and Steep Prices, LouisVuitton‟s Leather Goods Are De Rigueur for the Status Concious [online]. Available at:http://www.cigaraficionado.com/webfeatures/show/id/The-Louis-Vitton-Story_7599/p/4[Accessed 23 September 2012]Namazi, N. (2010) Is luxury counterfeting affecting Louis Vuitton? [online]. Available at:http://www.retail-digital.com/sectors/luxury-counterfeiting-affecting-louis-vuitton [Accessed23 September 2012]Noren, L. (2011) Demography of American childhood: The declining number of white kids[online]. Available at: http://thesocietypages.org/graphicsociology/tag/hispanic/ [Accessed 23September 2012]Nunes, P. F., Mulani, N. & Pozzi, A. (2008) Fighting fakes [online]. Available at:http://www.accenture.com/us-en/outlook/Pages/outlook-journal-2008-fighting-counterfeiting.aspx [Accessed 23 September 2012]Petterson, M. (2012) Effort to combat counterfeit products brings law enforcement, corporateexperts to Dallas [online]. Available at: http://crimeblog.dallasnews.com/2012/06/effort-to-combat-counterfeiting-brings-law-enforcement-corporate-experts-to-dallas.html/ [Accessed23 September 2012] Asia Pacific University of Technology & Innovation Page | 21
  • 22. Chan Chee Mang TP021569 BM014-3-3-DMKGPew Research Centre (2012) The Rise of Asian Americans [online]. Available at:http://www.pewsocialtrends.org/2012/06/19/the-rise-of-asian-americans/ [Accessed 23September 2012]Pub Articles (2012) The Brief Introduction of Luxury Brand – Louis Vuitton [online].Available at: http://articles.pubarticles.com/the-brief-introduction-of-luxury-brand-louis-vuitton-1311665458,264238.html [Accessed 23 September 2012]Reed, C. J. (2011) Louis Vuitton reaps the luxury whirlwind in Asia [online]. Available at:http://chrisreed.brandrepublic.com/2011/12/15/louis-vuitton-reaps-the-luxury-whirlwind-in-asia/ [Accessed 23 September 2012]Schulz, R. S. (2002) Can Luxury Goods Comglomerates Sustain Above-Normal Returns?The Gucci Group Case [online]. Available at: http://sepulvedanet.free.fr/gucci.pdf [Accessed23 September 2012]Schwart, D. (2010) The Luxury Goods Industry Is Changing The Way It Conceives AndMarkets It‟s Businesses, Socially And Environmentally Speaking [online]. Available at:http://www.sosemarketing.com/2010/06/07/the-luxury-goods-industry-is-changing-the-way-they-conceive-and-market-their-businesses-socially-and-environmentally-speaking/[Accessed 23 September 2012]Scott, J. (2011) “Battle of the handbags” Continues – Louis Vuitton Sues Home ShoppingNetwork [online]. Available at:http://www.scottandscottllp.com/main/louis_vuitton_sues_home_shopping_network.aspx[Accessed 23 September 2012]Slind, V. (2012) Vuitton, Zappa, Westinghouse Solar: Intellectual Property [online].Available at: http://www.bloomberg.com/news/2012-06-01/vuitton-zappa-westinghouse-solar-intellectual-property-1-.html [Accessed 23 September 2012]Smith, E. G. (2012) Louis Vuitton wins ITC trademark battle v. Chinese counterfeits [online].Available at:http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=45350&terms=@ReutersTopicCodes+CONTAINS+ANV [Accessed 23 September 2012] Asia Pacific University of Technology & Innovation Page | 22
  • 23. Chan Chee Mang TP021569 BM014-3-3-DMKGThe Economist (2011) The Middle Blingdom: Sales of costly trifles are even better than youthink [online]. Available at: http://www.economist.com/node/18184466 [Accessed 23September 2012]The Economist (2012) Knock-offs catch on [online]. Available at:http://www.economist.com/node/15610089 [Accessed 23 September 2012]The Globalist (2011) LVMH‟s Bernard Arnault on “Reverse Globalization” [online].Available at: http://www.theglobalist.com/storyid.aspx?StoryId=9094 [Accessed 23September 2012]Trend Hunter (2010) 13 Louis Vuitton Endorsements [online]. Available at:http://www.trendhunter.com/slideshow/louis-vuitton-endorsements [Accessed 23 September2012]Waldmeir, P (2012) Luxury brand makes links with China‟s past [online]. Available at:http://www.ft.com/intl/cms/s/0/d82d1a58-6f49-11e1-9c57-00144feab49a.html [Accessed 23September 2012]Waller, D. S. & Hingorani, A. G., Luxury Brands: What Are They Doing About SocialResponsibility? [online]. Available at: http://www.ccg.uts.edu.au/pdfs/WallerHingorani.pdf[Accessed 23 September 2012]Wiggin, A. & Mathias, I. (2012) Consumer Sentiment Plummets, OPEC Loses Member, FedPrints Billions, Grease is Gold, and More! [online]. Available at:http://5minforecast.agorafinancial.com/consumer-sentiment-plummets-opec-loses-member-fed-prints-billions-grease-is-gold-and-more/ [Accessed 23 September 2012] Asia Pacific University of Technology & Innovation Page | 23
  • 24. Chan Chee Mang TP021569 BM014-3-3-DMKG10.0 Appendices10.1 Appendix 1Louis Vuitton has won a landmark ruling in the US in the battle against counterfeiting. OnApril 17, 2012, the US International Trade Commission (ITC) upheld a ruling which willhelp stop goods being imported into the US bearing Louis Vuitton trademarks, and willpenalise companies (like Paypal) which facilitate the trade of those goods."As the first luxury goods company to seek redress at the ITC, we are pleased with thesignificant remedy that has been recommended. [...] The chief administrative law judgerecognises the importance of protecting intellectual property and took the welcome step ofensuring that its orders include all merchandise that infringes on our Toile Monogram Marks,and not just products of the respondents in this case. [...] Preservation of creativity is of theutmost importance to Louis Vuitton and we will continue to protect our brand and customers,and to preserve the rights of designers, artists and brands." (Valerie Sonnier, globalintellectual property director of LV to WWD)Other brands like Tory Burch, Polo Ralph Lauren and True Religion have reached for theITC with similar cases, but none of them has won a comparable ruling.BACKGROUND - The April 17 ruling was issued in the context of Louis Vuitton complaintfiled at the ITC on December 03, 2010 (Certain Handbags, Luggage, Accessories andPackaging Thereof (Inv. No. 337-TA-754)) requesting investigation pursuant to Section 337against a group of respondents from Guangzhou China, Texas and California, for theunlawful sale for imporation, import and sale into the U.S. of handbags, luggage, accessoriesand packaging that infringe Louis Vuittons US monogram trademark registrations (nos.1,643,625; 1,653,663; 1,875,198; 2,773,107; 2,177,828; 2,181,753; and 1,519,828). Asia Pacific University of Technology & Innovation Page | 24
  • 25. Chan Chee Mang TP021569 BM014-3-3-DMKG Louis Vuitton US Trademark RegistrationsThe respondents were identified as House of Bags, Ronett Trading, Inc., EZ Shine Group,Inc., Master of Handbags, Choice Handbags, Handbag Warehouse, T&T, and The InspiredBagger.(Sources from: Detailed trademark information from the official, 2012, European Uniontrademark database (CTM), available at:http://trademark.markify.com/trademarks/ctm/lvs+dairek+usa./003939501)10.2 Appendix 2Table showing the raw material restrictions on clothing and fashion goods legislative indifferent countries.(Sources from: Waller and Hingorani, 2012) Asia Pacific University of Technology & Innovation Page | 25
  • 26. Chan Chee Mang TP021569 BM014-3-3-DMKG10.3 Appendix 3 Asia Pacific University of Technology & Innovation Page | 26